Resource title

The impact of optimal tariffs and taxes on agglomeration

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Resource description

This paper extends an economic geography model by tariffs to analyze their impact on welfare and sustainability of agglomerations. Policies with and without cooperation are compared, with the goal of maximizing aggregated welfare in the former and regional welfare in the latter case. The main result is that under cooperation poorer regions are worse off in two respects. In the short-run they loose even more welfare and in the long-run sustainable agglomerations in richer regions get more likely. Thus, although cooperation could generate aggregated welfare gains the potential losers face even in the short-run no incentive to remove tariffs unless they are compensated appropriately, for instance by transfers. In this sense transfers from the rich to the poor are not only a policy to reach the goal of equity but also a necessary precondition to reach aggregated efficiency.

Resource author

Matthias Ross

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/19393

Resource license

Adapt according to the presented license agreement and reference the original author.